Direct Line reports profit rise but loses motor customers

Direct Line Group reported a pre-tax profit of £61.6 million for the first half of 2023, a significant recovery from a loss of £76.3 million in the same period last year. However, this profit fell short of analysts' expectations, which forecasted £85 million. The company faced challenges in its motor insurance division, losing 488,000 customers due to a 31% increase in renewal premiums, which led to a 3.1% decline in in-force policies compared to December 2022. The average premium for new customers rose by 16% to £592, while existing customers experienced a 31% surge in renewal prices, reaching £514. Despite these price hikes, the motor insurance division managed to achieve operating profits of £3.1 million, recovering from a substantial loss of £180.4 million a year prior. The wider market saw a 2% reduction in car insurance premiums during the second quarter, but Direct Line maintained its pricing strategy. The company emphasized disciplined underwriting as a key factor in its performance, resulting in a 7.5% reduction in own-brand policy count. However, retention rates improved in the second quarter as the market began to stabilize following previous rate increases. Direct Line's management is focused on ongoing business transformation, aiming to cut annual costs by at least £100 million by the end of 2025. New CEO Adam Winslow acknowledged the progress made but stressed the need for continued efforts to enhance the company's performance. The firm recently resisted a £3.1 billion takeover bid from Ageas, indicating its commitment to restructuring and improving its market position.